1、Chap 3 Adjusting and Preparing Financial StatementsContents3.1 The need for adjustments3.2 Adjusting the accounts3.3 Adjusted trial balance and preparation of financial statements3.4 The worksheetContents3.5 Closing entries3.6 Post-closing trial balance3.7 The accounting cycle summary3.8 Classificat

2、ion of balance sheet items3.9 Practices in China3.10 Using the accounting information the current ratio3.1 The need for adjustmentsJournalize and Post Closing EntriesAnalyze TransactionsOriginal DocumentsMake AdjustmentJournalize TransactionsJournals分錄賬Post to the LedgerGeneral Ledger分類賬Prepare Tria

3、l BalanceTrial Balance試算平衡表Prepare Adjusted Trial BalanceAdjusted Trial BalancePrepare Financial StatementFinancial StatementsPrepare Post-closing Trial BalancePost-closing Trial Balance1234567891011121234Annually12MonthlyQuarterlySemiannuallyThe Accounting PeriodJanFebMarAprMayJunJulAugSepOctNovDec

4、AccountingAccrual Basis vs. Cash BasisAccrual BasisRevenues are recognized when earned and expenses are recognized when incurred.Cash BasisRevenues are recognized when cash is received and expenses recorded when cash is paid.Not GAAP3.2 Adjusting the accountsAdjusting: Deferrals and Accruals 遞延項(xiàng)目與應(yīng)計(jì)

5、項(xiàng)目Deferred Revenue, Deferred ExpenseAccrued Revenue, Accrued ExpenseUnearned RevenuePrepaid ExpenseEnd of accounting period.Revenues earned Deferrals: (1) Deferred Revenue ( L)Deferrals: Cash receivedJan.31Jan.1Feb.15Deferred Revenueor Unearned Revenue (L)Dr. Cash xxx Cr. unearned revenue xxx Dr. un

6、earned revenue xxx Cr. Revenue xxxAdjustmentEnd of accounting period.expense incurred.Deferrals: Cash paid.Jan.31Jan.1Feb.15Deferred Expenseor Prepaid Expense (A)Dr. Prepaid Expense xxx Cr. Cash xxxDr. Expense xxx Cr.Prepaid Exp. xxxAdjustment Deferrals: (2) Deferred Expense ( A)SuppliesDepreciation

7、Dr. Depreciation Expense xxx 折舊費(fèi)用 Cr. Accumulated Depreciation xxx 累計(jì)折舊End of accounting period.Accruals: Cash receivedRevenues earnedJan.31Jan.1Feb.15Accrued Revenue (A) Dr. Accrued revenue xxx Cr. Revenue xxxAdjustmentDr. Cash xxx Cr. Accrued revenue xxx Accruals: (3) Accrued Revenue ( A)AREnd of

8、accounting period.Accruals: Cash paid.expense incurred.Jan.31Jan.1Feb.15Accrued Expense (L)Dr. Expense xxx Cr.Accrued Exp. xxxAdjustmentDr. Accrued Exp. xxxCr. cash xxx Accruals: (3) Accrued Expense ( L)salaries PayableAdjustmentsAdjustments: Deferrals and AccrualsPaid (or received) cash before expe

9、nse (or revenue) recognizedPaid (or received) cash after expense (or revenue) recognizedPrepaid (Deferred) expenses*Unearned (Deferred) revenuesAccruedexpenseAccruedrevenuesFramework for Adjustments*including depreciationExamplesPrepaid Insurance On December 1, 2007, Scott Company paid $12,000 for i

10、nsurance for December 2007 through May 2008. Scott recorded the expenditure as Prepaid Insurance on December 1. What adjustment is required?637128Dr CrSupplies During 2007, Scott Company purchased $15,500 of supplies. Scott recorded the expenditures as Supplies. On December 31, a count of the suppli

11、es indicated $2,655 on hand. What adjustment is required?126652Dr Cr On October 1, 2007, Ox University sold 1,000 season tickets to its 20 home basketball games for $100 each. Ox University makes the following entry:Dr Cr On December 31, Ox University has played 10 of its regular home games, winning

12、 two and losing eight.Dr CrBarton, Inc. pays its employees every Friday. Year-end, 12/31/07, falls on a Wednesday. As of 12/31/07, the employees have earned salaries of $47,250 for Monday through Wednesday of the week ended 1/02/08.Dr CrSmith & Jones, CPAs, had $31,200 of work completed but not yet

13、billed to clients. Lets make the adjusting entry necessary on December 31, 2007, the end of the companys fiscal year.Dr Cr3.3 Adjusted trial balance and preparation of financial statements3.4 The worksheetFastForward - Trial Balance - December 31, 2007First, the initial unadjusted amounts are added

14、to the worksheet.Next, FastForwards adjustments are added.FastForward - Trial Balances - December 31, 2007Then, the adjusted totals are determined.FastForward - Trial Balance - December 31, 2007Finally, the amounts in F/S are determined.FastForward - Trial Balance - December 31, 2007Exercise 3-1 page101a) Dr. Dep. Exp. 72 000/3*3/12 Cr. Accu. Dep. 6 000b)Dr. unearned Consulting Fees 6 000 Cr. Fees revenue 6 000c) Dr. Rent Exp. 45 000*4/6 Cr. Prepaid Rent 30 000 d) Dr. Wages Exp. 19 000 Cr. Wages Payable 19 000e) Dr. Interest Exp. 84 000*7%*3/12 Cr. Interest Payable 1 470f) Dr. AR